Cheap gas causes IGS to drop contract with NOAC

Written by Kelly Kaczala

February 25, 2010

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Columbia Gas of Ohio this week filed its Gas Cost Recovery (GCR) adjustment for March with the Public Utilities Commission of Ohio (PUCO), a cost that is considerably less than the cost of natural gas last March.

The GCR of 44 cents per Ccf (100 cubic feet) of natural gas will be 51 cents lower than last March, when it was 95 cents.

Warmer weather decreased the typical residential customers March bill to $91.60, compared to $104.31 last month.

The March bill will be $70.73 lower than last March, which was $162.33.

The March GCR will be in effect from March 1 through March 29.

The low GCR has had an impact on Interstate Gas Supply (IGS), an alternate natural gas supplier hired by the Northwest Ohio Aggregation Coalition (NOAC), a consortium of communities that includes Oregon, Northwood, Lake Township, Toledo, Maumee, Sylvania, Perrysburg, the Village of Holland, and unincorporated areas of Lucas County. It’s rate is always 3.5 cents per Ccf less than Columbia’s price.

“All IGS customers will be going back to Columbia Gas of Ohio,” Paul Goldberg, Oregon’s law director who is the city’s representative for NOAC, said to Oregon council last Monday.

“Probably all of our residents have gotten or will receive letters from IGS gas, the gas supplier the city aggregated with for a number of years,” he said.

“We had a two year contract with IGS, which they can get out of the second year, and that second year is coming up. Our contract is what’s called a fixed price contract, which means we get a certain percentage off the GCR, the rate that Columbia charges. Our customers get a small percentage off of that. Right now, the GCR is so low, that IGS just can’t afford to sell us the gas at that price. They’re losing money. So they have informed us they’re going to be opting out of the second year of the contract, which they have a right to do. Our NOAC group has agreed to let them out a month early because they’re going to refund to us the difference that our customers would have received in a discount. They will cut NOAC a check between $300,000-$400,000,” said Goldberg.

Residents do not need to seek alternative gas suppliers because Columbia Gas of Ohio currently has the cheapest rate.

“The best way residents can save is to do nothing,” said Mike Beazley, who begins his job as Oregon Administrator on Monday. “There should be no prices anywhere in the market that are lower than Columbia’s current GCR. The consortium is going to look at options on the best way to save in light of the low GCR, so there will be another way to save coming up soon. This is an artificially low GCR because of the way Columbia Gas has drawn down their inventory.”

NOAC has the option of choosing contracts that include either fixed or floating prices, said Goldberg.

“We have gone with a fixed price in the past, as have a number of the other governmental aggregation groups. Each has pluses and minuses. Columbia gas price floats day to day. So right now, if you’re getting in on their price, it’s terrific because it’s very, very low. That might change next year, and it could be very, very high. It’s been to our advantage in the past to be on the fixed price. And we’ll continue to look into that,” said Goldberg.